Stocks have hit a rough patch during the past 24 hours. The Shanghai Composite closed down 4.3%. At noon today, the S&P 500 is off 2.5%. And the Toronto Stock Exchange is down by 2.3%. What’s going on?
We might call it the Conference Board Massacre. Two reports from the forecasting organization helped trigger the sudden negativity. First, it revised the April reading of its leading economic indicator for China from 1.7% to 0.3% (blaming a calculating error). Second, the Boards confidence index for U.S. consumers collapsed by almost 10 points, landing at 52.9 in June.
But fresh worries over Europe are also a culprit. The European Central Bank now wants to offer emergency financial support to European banks for only three months instead of a year, raising the rollover risk for the banks. On the news, the interbank lending rate in Europe (Euribor) leapt to its highest rate since September.
We have taken several more steps closer to a new round of massive monetary intervention — a possibility alluded to in yesterdays post. Days like today will certainly weaken the hand of the inflation hawks within the ranks of the policymakers.